Focus on Value 3
What does the new value-based healthcare landscape mean for sales?
In their recent book, Healthcare Disrupted – Next-Generation Business Models and Strategies, Accenture’s Jeff Elton and Anne O’Riordan ask the question: “What value is being paid for and who is paying for that value? This is a fundamental question that pharma organizations need to answer if they are to be successful commercially.
The authors’ response is clear and detailed: “The ‘what’ is now demonstrable clinical outcomes. The ‘who’ is being redefined by the meta- and micro-regional healthcare reforms that are creating new structures and placing more risk on healthcare providers. New market demands and new payers all imply that new business and operating models will be required. There should be no debate. The more disrupted the legacy models are, the more differentiated the new ones need to be.”
One suggested approach is for organizations to adopt a new business model – what the authors term the “Value Innovator” – predicated on improving patient outcomes. “This business model bets on improving the efficiency of the health system overall. Businesses using it are rapidly developing deep expertise in creating therapeutic packages, utilizing a digital infrastructure that integrates drugs, devices and services with clinical processes.”
Such Value Innovators have moved further towards a pure services approach, and the model implies a mindset shift: health as opposed to disease – a bigger picture, system view. What this implies, however, is that, to succeed in future, companies are going to have to leave behind past successful strategies and adopt a new approach, seeing themselves as distinctive partners and service providers at scale – “ever focused on integrating multiple solutions to drive measurable and ever-improving value for patients and the health systems.”
This scenario has profound implications for the way we sell, in a move away from a traditional customer-supplier relationship towards collaboration. “Health providers, health authorities, health payers, biopharmaceutical and medical device companies all have aligned interests on which to build.”
New start-ups have arisen to take advantage of the very complexity of the transformation in the healthcare sector both within the United States and beyond. Ray Tew of MedicusInnovation is under no doubt about how far-reaching the changes will be: “The financial impact of value-based healthcare is exponentially bigger than past healthcare market reform initiatives.”
He says: “These changes represent tremendous opportunities for the pharmaceutical industry. Pharma customers (healthcare providers such as hospitals and physicians) are ill-equipped to deal with these new challenges and are looking for partners to help them navigate them. While access to key decision makers and physicians declined over the last decade, the value-based conundrum thrust upon healthcare providers has made them more open to partnerships. The determining factors for successful partnerships will be which pharma company can develop a thorough understanding of their customer’s issues and are willing to adapt how they work with them to create ‘win-win’ scenarios related to patient care.”
Fee for service or payment for the volume of services rendered will soon be a relic of the past. Such views align with those of the healthcare professionals themselves, so what can healthcare suppliers do to remain relevant in this context?
In short, less pitching and more active listening. What I would do is ramp up the effort and time that I’m spending studying and understanding my market.
Dr Jeffrey Farber, CEO, Mount Sinai Care offers this perspective: “What can life sciences companies do to adapt to this new environment? In short, less pitching and more active listening. What I would do is ramp up the effort and time that I’m spending studying and understanding my market.”
Healthcare is very local and also very different along the continuum of fee-for-service and fee-for-value. Questions to consider include: what type of governance structure there is – who’s making the decisions? What are their focus areas and what are their pain points? Instead of coming with an agenda “I’ve got a product to sell”, sales organizations need to figure out how their product, service, technology, medicine or device fits in.
This includes understanding what’s driving the providers, for instance, shared savings opportunities or the need to promote adherence for common chronic conditions – that way, patients do better, providers get paid for achieving certain benchmarks and pharma companies will see better results and improved market share. Relevant information is already available publicly through annual reports, filings, and other public documents.
The sale is becoming increasingly sophisticated as providers consolidate and also become more sophisticated. This may involve a switch in emphasis towards talking to procurement organizations and ACO leadership teams, where the CEO and CMO are important. It’s vital for sales to get a real understanding of what type of organization they are approaching and what it’s focusing on.
Dr Farber emphasizes: “If there’s a potential fit if you’re in that space, you’ll want to have a conversation. If you’re not then, frankly, you don’t and you want to move on and see who else might be. I’d want a very focused ‘I understand this is what you are doing’ and then a lot of listening, and then a very focused ‘Here’s what we can do.’”
Denise Prince, CEO, Keystone ACO reinforces the point: “A pharma or device company has to show that it can deliver meaningful change in the total cost of care in order to get the attention of the ACO.” This is particularly relevant in the case of more expensive drugs or devices that affect many beneficiaries.
“If it’s a drug or device that many people use and there is evidence that use of the drug or device reduces the use of hospital services or improves the quality of care, then that is going to be meaningful for the ACO.”
“It’s truer than ever that the value proposition – the cost-benefit – of a drug or device has to be very well documented and has to be of significance in terms of number of patients affected or the total spend.” Products that only bring marginal incremental value combined with a hefty price tag are likely to be discouraged, according to Prince. “The concept of stewardship of resources will matter more this year and in the coming year.”
How does this translate into an approach that companies should take? “I think they need to understand the population that is being managed and be able to articulate what the impact of that drug or device is on that population.” This might include evidence that the product reduces uses of the emergency room or readmission, helps avoid surgical procedures, or improves compliance, for instance.
Interpreting the reforms
Analytics companies like MedicusInnovation have set up specifically to help healthcare players interpret the financial consequences of the healthcare reforms. B2B sales models today inevitably involve understanding the customer’s perspective and how the organization can help a customer’s customers; Medicus offers the opportunity for companies to gain market perspectives and new insight into their customers’ issues.
Tew suggests that pharma is only now waking up to the new reality of the value-based healthcare market.There have been sporadic efforts to increase training for key account management and sales teams on healthcare reform; however, he contends that a lack of internal subject matter expertise and value-based market analytics have prevented pharma companies from building strategic plans to take advantage of the new market dynamics.
Moreover, the traditional pharma marketing model is typically based on a series of independent, internal initiatives with limited coordination; this prevents the sharing of best practices and the leveraging of relationships and resources and has a negative impact on the overall effectiveness of the market strategy.
Tew suggests that up to seven different pharmaceutical “teams” – healthcare economics, outcomes management, clinical education, medical, managed care, key account management and sales – may be working with a single key customer on completely different projects. “Each project most likely has different goals and while all may be tactically successful, this piecemeal approach cannot possibly align with the strategic needs and challenges of the customer in the new value-based environment.”
A value-based customer-centric marketing model will enable pharma to respond more quickly to customers by developing integrated strategies that address both the acute and long-term interests and goals of their customers.
“Value-based healthcare marketing will require the industry to make fundamental changes to the deployment and capabilities of their field forces and internal clinical support teams.” Such changes include the need to access new value-based market analytics, build new skills, build subject matter expertise, create new training strategies, ensure that the field force is optimized with the right mix of assets, and support new brand messaging.”
In line with other industries, Tew argues that the role of the traditional sales rep will continue to decline in strategic importance. “In their place, companies will need teams with new skills that enable them to establish deeper ‘business relationships’ with key stakeholders within the hospitals, integrated delivery networks and physician groups.”
So what’s the view of pharma execs? It seems that they are well aware of the implications of the new commercial models in healthcare but the tricky part will be actually responding and implementing new structures. Peter Hoang, Senior Vice President, Business Development & Strategy at Bellicum Pharmaceuticals says: “This is a necessary change that we, as an industry, have to make.”
He tells eyeforpharma: “In many ways, Big Pharma does an extremely good job of selling its products, but the focus tends to be squarely on the doctors.” Meanwhile, the Affordable Care Act has concentrated minds in the industry on total costs to the system. “That is going to be magnified as people look much more closely at the overall cost of care. There is a real impetus on behalf of regulators, payers and patients to drive down costs.”
He sees an increased focus on payers as well as providers. “We must develop a corporate sales effort that is education- and research-focused. Today, the payer relationships exist at a corporate level – that means senior executives, often at the C-level, talking to other senior executives, rather than the sales force being engaged with reimbursement professionals. So we have to redirect that traditional sales force model from a B2C doctor focus, to more of a B2B orientation to effectively engage the payers. By extending the efforts of our sales forces, we will be enabling our newest constituents, the payers, to make an informed judgment about what the right treatment is.”
Putting the patient first
New commercial models inevitably mean that companies will have to invest in developing their people to prepare them for the market transformation. Other components of the sales management toolkit, such as incentives, may also need to support the new thinking.
Marc Bacon, Director of Incentive Compensation at Sanofi, is responsible for designing compensation plans for some 3,000 sales associates across pharma, surgery, bio-surgery, US managed markets and oncology. He is closely involved with strategies that seek to maintain engagement with customers.
Exactly how does the industry develop a field force that drives sales, while also building on meaningful engagement with physicians (in the context of declining face time)? “The short answer is putting the patient first. You can’t have a strategy or incentive compensation plan that is not mirrored to the needs of our customers and their patients.”
Of course, this hasn’t always been the case, so is patient centricity one of the metrics Sanofi uses for the plan? “It should be. I’ve certainly been around long enough to see incentive strategies that were not aligned to that. In the end, what we did is end up frustrating our customers,” he acknowledges.
Given the longer-term nature of some aspects of the commercial model, how do effective incentives help achieve longer-term strategic objectives (rather than short-term tactical objectives)? “The quickest answer is to have a longer incentive plan. This depends on the role of the sales associate.” There is a significant difference between the length of the sales cycle and timeline for an associate calling on a primary-care HCP and an account manager calling on a national payer. “The easiest thing you can do is to make sure you are measuring at the right time and the right objectives,” he explains.
Tools to support the sales force
Meanwhile, the existing sales teams need to keep doing their job as efficiently as possible while new market approaches are implemented. One solution is to boost the usefulness of the traditional rep for the HCP.
Lars Diemer, CEO of Agnitio says: “Life sciences is increasingly moving towards a model that focuses on overall treatment outcomes. This calls for reps to work in new ways and help HCPs and patients solve treatment challenges. That’s where we believe technology plays a significant role – providing tools that empower people to act where it matters most.”
One way to do this is by enabling reps to help doctors with their patient communication. With the right technology, reps can provide HCPs with both patient-relevant material and the means to easily share it with their patients. This enables reps to have better quality, more treatment-centered discussions – as well as producing a lasting effect with doctors having content available that they can use as and when needed, Diemer concludes.
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